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On January 1 of this year, the Illinois Freedom
to Work Act went into effect. The new law prohibits private sector employers
from entering into covenants not to compete with "low-wage
employees," employees who earn the greater of the applicable hourly
minimum wage (currently $7.25 per hour under federal law, $8.25 per hour under
Illinois law, and $10.50 per hour under the City of Chicago Minimum Wage
Ordinance) or $13.00 per hour. Thus, unless and until the minimum wage is
increased above $13.00 per hour, the Act prohibits employers from entering into
covenants not to compete with employees who earn $13.00 per hour or less.

The Act's definition of "covenant not to compete"
includes any agreement entered into after January 1, 2017 that restricts the
employee from performing: (a) any work for another employer for a specified
period of time; (b) any work in a specified geographical area; or (c) work for
another employer that is similar to the employee's work for the employer. The
Act states that any such covenant not to compete between an employer and a
low-wage employee is "illegal and void."

The new law comes on the heels of a June 2016 lawsuit filed
by the Illinois Attorney General against Jimmy John's Enterprises LLC, alleging
that Jimmy John's imposed highly restrictive non-competition agreements on its
employees, including low-wage sandwich shop employees and delivery drivers. As
part of the December 2016 settlement of that suit, Jimmy John's agreed to cease
using such non-competition agreements and notify all current and former
employees that their non-competition agreements were unenforceable.

To ensure compliance
with the Illinois Freedom to Work Act, Illinois employers should review their
practices to confirm they are not requiring employees earning $13.00 per hour
or less to enter into non-competition agreements. The Act, however, does not
prohibit employers from requiring employees to execute non-disclosure or other
confidentiality agreements aimed at protecting an employer's confidential
information, nor does it expressly apply to non-solicitation agreements that
prohibit an employee from soliciting an employer's customers or other
employees.

The views expressed in this document are solely the views of the author and not Martindale-Hubbell. This document is intended for informational purposes only and is not legal advice or a substitute for consultation with a licensed legal professional in a particular case or circumstance.

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